The Indian financial market has a ton of loans available, due to which borrowers find themselves confused between a ton of options. However, the most common choices are gold loans, personal loans, car loans and home loans. Now, these options tend to differ in terms of eligibility criteria, rate of interest, term, and security requirements.
Today, we’ll explore the differences between all these types of loans and help potential borrowers make informed decisions. Moreover, apart from this, nowadays there are certain tools available as well such as gold loan calculator, home loan calculator etc,.
Personal loan
An unsecured loan, this type of loan is a financial instrument where a potential borrower receives a sum of money from a lender (financial institution or online credit app) without any need for collateral. These loans are versatile and can be used for various purposes, such as medical expenses, debt consolidation, home renovation, etc.,.
The borrowers here need to repay the loan in fixed monthly instalments, including interest, over a predetermined term, which usually ranges from one to five years. The loan’s approval and rate of interest depend on the creditworthiness of the borrower, income, and the lender’s terms and conditions.
Home loan
Also known as a mortgage, it is a financial arrangement where a bank or lending institution provides funds to individuals or families to purchase a new residence. The borrower here agrees to repay the amount of the loan, typically with interest, over a specified term, often spanning 10-30 years.
In this system, the purchased residence serves as collateral, allowing the lender to take possession in the event of default. Lastly, the rate of interest and tenure totally varies based on the borrower’s creditworthiness and, most importantly, market conditions.
Gold loan
A completely secured loan is a type of loan where borrowers pledge their gold jewellery as collateral in order to obtain funds from a financial institution. The amount of the loan here is determined based on the value of the gold, purity, and weight.
Moreover, these are generally short-term loans with lower rates of interest than the unsecured ones and can be availed only if you are 18 years old or above. The borrowers must repay the loan within a specified term, after which the pledged gold is returned.
Auto loan
As the term implies, it is a financial arrangement in which a lender offers funds to an individual in order to purchase a new vehicle. The borrower here agrees to repay the loan amount and the interest amount over a specified tenure, ranging from 24 to 84 months.
Further, these loans can be secured, with the vehicle serving as collateral, or unsecured, with no collateral required but often carrying a higher rate of interest.
Conclusion
Each type of loan has different offerings, and it totally depends on the needs, tolerance of risk, etc., of individuals. The ultimate decision hinges on your immediate financial requirements and ability to repay the loan. Therefore, if you are looking for a smaller and short-term loan, a loan against gold from a gold loan app may be the best for you.
However, traditional loans may suit your needs if you require a larger sum and can meet the necessary criteria. So, carefully scrutinize your current financial situation, consider the benefits and risks, and consult a financial advisor.
